Thursday, 23 February 2017

Barclays’ Financial Results: The Use of Terminology to Create Distance

Continuing the coverage of the U.K.’s
largest banking institutions revealing their financial positions, which has
included RBS,
HSBC,
and Lloyds
so far, this short post will use the financial report from Barclays, which was released
today, to make a point about a theme that is developing amongst the most
important banks around the world. During a report on the release of the
figures, Barclays’ Chairman, John McFarlane, stated that although the results
were very good for the bank, it still faced challenges because ‘a
number of potentially material legacy
conduct matters need to be resolved at acceptable cost’, by which he is
referring to a number of investigations by regulatory bodies in to the bank’s
conduct surrounding the Crisis. For this post, the focus
will be on this continued use of the word ‘legacy’, which denotes a different
era to the current era of banking – the issue for this post is that the era in
question was only 10 years ago, and multiple infractions continue to this day,
so the attempt to negate the actions of these banks as something that happened
in another era is deeply insulting, and it is this that will be the focus of
the short post.

Barclays has indeed posted good
financial numbers this reporting season, with the headline being that the bank’s
profits have almost
trebled from last year. In attempting to downplay ideas of success at the
moment, McFarlane mentioned the regulatory issues facing the bank, but
concluded by stating that ‘I genuinely believe we can see the light at the end
of the tunnel’ – the issue here is, what about your actions that led you into
the tunnel? What can be done to stop you going through the tunnel again?
Essentially, the first thing to do would be to understand the issues that
blighted society a decade ago as systemic issues, but the opposite of this is emanating
from the reports of these leading banks. RBS, a firm blighted by their conduct
to this very day, relate their current problems to their ‘legacy issues’. Goldman Sachs cited their pleasure at putting their ‘legacy
matters’ behind them when they settled with the SEC for $5 billion last
year, and actions by both HSBC
and Lloyds have been
referred to in terms of their actions representing a ‘legacy’ and as different
to the current incarnation.

This is all well and good if these firms really did move on from
these periods and altered their approaches, but there is absolutely no proof of
this. Barclays, as a key constituent of this ‘legacy’ narrative, is perhaps the
best example to use to demonstrate the ludicrousness of this attempt. In 2012
the bank was fined £290
million for attempting to manipulate interest rates, known as ‘Libor’ and ‘Euribor’
(a rate of interest between banks), and in 2016 reached a further $100
million settlement with 40 U.S. States on the same charge – the total,
inclusive of settlements with both British and American regulators, amounts to around
£1.53 billion. The damage that regulators may cause from Financial Crisis-era
scandals are yet to be determined, with the U.S. DoJ and U.K. Serious Fraud
Office still investigating the bank (the DoJ has recently began civil
proceedings against the bank after its refusal to settle), but the presence
of post-Financial Crisis transgressions reveal that to understand their
Financial Crisis-era transgressions as detached from everything else is not
only dangerous, but downright delusional. The transgressions of RBS continued
abound after the Financial Crisis, as discussed
previously, and so too have Barclays’ transgressions (as well as many others
like Deutsche Bank, HSBC, and this may be extended with the much anticipated release of Standard Chartered’
s results tomorrow).

The financial elite have attempted
to cast the Financial Crisis as a solitary event, and we simply must not let
them. The conduct of the banks and other financial institutions since the turn
of the millennium was not down to hubris, but simply due to a weakening of the
restraints that surround the venal monster that is the financial services. Not
every element of the financial services can be categorised in this manner, of
course, but the vast riches available for a short-term evacuation of responsibility and
morality mean that there must be a constant and real restriction on the ability
of people to transgress in such a socially-vital area, and not letting those
actors who transgress paint their actions as a ‘one-off’, in spite of overwhelming
evidence, is a good place to start.

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